ANKARA: Turkey's central bank may hold an early monetary policy meeting next week and discuss an interest rate cut if inflation continues to fall sharply, Governor Erdem Basci said on Tuesday.
Basci, who is under pressure from the government to lower rates ahead of a June parliamentary election, said the bank could act as early as Feb. 4 if data due a day earlier shows January inflation slowing by more than 1 percentage point.
The lira weakened to 2.36 against the dollar on his comments, reversing earlier gains after he announced a cut in the bank's forecast for inflation this year to 5.5 percent from a previous 6.1 percent.
"We could hold a meeting to take a rapid decision," Basci told a news conference called to announce the bank's quarterly inflation report.
"If January inflation falls more than one (percentage) point and core (inflation) is good, we could even make an assessment on Feb. 4," he added. The next monetary policy committee meeting is scheduled for Feb. 24.
Manik Narain, a strategist at UBS, said Basci's comments were "very dovish".
"Considering emergency meetings in line with falling inflation does seem arguably a bit premature, given that their inflation target is 5 percent... It does create some medium-term risks," Narain said.
Turkey's central bank lowered its main interest rate last week and drew a swift rebuke from government ministers who said the 50 basis point cut was not enough to support economic growth.
The bank cut its main one-week repo rate to 7.75 percent in response to slowing inflation, but left other rates on hold.
Basci said inflation could drop to its lowest in 45 years this year and said the midpoint of the bank's 2016 year-end inflation forecast was 5 percent.
The decline in inflation is expected to accelerate from this month, approaching the bank's 5 percent target in the middle of the year, he added.
The lira initially firmed to below 2.34 against the dollar following Basci's comments on inflation, from 2.3520 before he spoke. But it eased back to 2.3600 by 1024 GMT after he raised the possibility of an early policy meeting.
Turkish consumer prices fell 0.44 percent month-on-month in December for an annual rise of 8.17 percent and are expected to end this year at 6.82 percent, according to the latest central bank survey of business leaders and economists.
Basci also said he expected a gradual increase in economic growth this year, helped by domestic demand.
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